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Old 10-19-2010, 01:46 PM   #1
Edward Hamilton
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Default Rum wars hit Hill, K St. and Main St.

Source: Politico
By: Bob Barr
October 18, 2010 04:31 AM EDT
A little-known tax-rebate program, the "Rum Cover Program," was created to help the U.S. Virgin Islands and Puerto Rico by giving them the lion's share of excise taxes collected by Uncle Sam on rum produced there.
Unless Congress acts soon to curb abuses in the program, the rum tax program is likely to transfer billions in U.S. tax dollars to a British-based liquor producer. But some influential K Street lobbyists are doing all they can to slow congressional action. They have proved effective so far, even though their success could lead to major financial losses for U.S. grain producers.
The tax rebate program - which provides some $400 million in aid to Puerto Rico and about a fifth of that to the Virgin Islands - has been routinely reapproved by the Congress each year, with little controversy. It gained bipartisan support, largely because the rebated funds have been used for economic and social programs on the islands.
Yet all that is about to change - at least with regard to the Virgin Islands, which two years ago consummated a 30-year deal with Diageo, one of the world's largest liquor conglomerates. The Virgin Islands government lured the company to move much of its Puerto Rican rum production, by promising to give one-half of its rum cover monies to the huge corporation.
The bargain would give Diageo other significant tax incentives. But it is the cover program element that has rightfully drawn sharp criticism from Puerto Rico - and from some members of Congress, who view the Diageo deal as a clear abuse of the rebate program.
Given the size of the potential loss to Puerto Rico - estimated at some $6 billion over the life of the 30-year deal - the political forces in San Juan have now mounted an effort to push Congress to pass legislation that would limit the amount of the rebates transferred to private manufacturers. They want it to be only 10 percent - the same limit that Puerto Rican domestic law places on the rebate transfers.
Both governments have engaged powerful K-Street lobbying firms, including those with marquee former members of Congress on their letterhead, to influence the legislative effort.
Thus far, thanks in no small measure to the work of the Congressional Black Caucus, which has come down strongly on the side of the Virgin Islands, the restrictive legislation has been stalled. Black Caucus member Charles Rangel (D-N.Y.) had kept the rum cover program transfer limit bottled up in the Ways and Means Committee before he stepped down as chairman in March because of ethics investigations.
Now, the gridlock that has settled over the Congress because of the hotly contested midterm elections has meant that virtually all tax measures - including extension of the so-called "Bush tax cuts" - continue to languish. This includes the bills in both bodies that would place limits on the transfer of the rum cover program rebates.
The Diageo deal's ramifications are significant -- extending far beyond the tax program itself. The Virgin Islands has reportedly been attempting to convince other foreign and domestic alcohol producers to move their alcohol blending operations to the islands from the continental United States. It is sweetening the pot with promises similar to those it granted Diageo.
This scenario could result in distillers substituting sugar cane-based alcohol for the more prevalent, corn-based alcohol now used in liquor production on the mainland.
Industry experts predict that if such a trend continues, losses to domestic corn producers, and to annual federal excise tax revenues generally, would reach into the billions of dollars annually. It could also mean major employment cuts in farming and manufacturing.
The question is: Will U.S. industry representatives and members of Congress in both Houses -- many of whom face tough reelection battles in a sour economic climate -- sit by and allow legislation to die that could stanch at least part of this economic blood flowing overseas?
The answer may come as early as next month, when Puerto Rico and its advocates are likely to be pushing hard to include the rum cover tax limitation proposal in legislation that reaches the floor during the scheduled lame-duck session. Its adversaries in this Rum War will be pressing just as hard to ensure that such provisions are kept out of any lame-duck bills.
On the sidelines, tax-hawk watchdog groups will be keeping score; and watching for clues as to whether the next Congress will be more serious than the current one about ending tax abuses and saving U.S. jobs.
Bob Barr served in Congress from 1995 to 2003.
Edward Hamilton
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Old 10-19-2010, 06:11 PM   #2
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Come on Congress, whether you're Democrate a Republican giving HUGE tax dollars to an over-sea's corporation is bad, wrong and many more negative words as well.
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Old 10-19-2010, 07:17 PM   #3
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Old 10-19-2010, 08:16 PM   #4
Edward Hamilton
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Be careful what you wish for!!!
Edward Hamilton
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When I dream up a better job, I'm going to take it. In the meantime, the research continues.
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Old 10-20-2010, 04:35 AM   #5
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Default Rum in Harlem...I think not.

Poor Charlie can't help himself when it comes to Caribbean Pork. He probably has another secret hideaway in the Virgin Islands, to crisp his hide in winter...Or could it be he's on one of Diageo's Board of Directors for Rum Runners and retired ex-Con-gressmen.
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